Paolo Pellegrini to return investor capital

By Josh Friedlander

Fri Aug 20, 2010

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The Paulson protégé is stepping back from managing investor capital given challenging market conditions.

Paolo Pellegrini announced today that he will be returning all outside investors’ capital in his global macro firm PSQR Capital by the end of September, citing the additional work necessary to profit from his bearish views.

The PSQR Master Fund was down about 11% through July 31. The fund, which launched in April 2008 and opened to outside investors in December 2009, had previously produced substantial outperformance, having gained 40% in 2008 and 61.6% in 2009.

"While my views on global economies haven’t changed, I’ve concluded that substantial additional work is required to position the Fund to profit consistently from those views," said Pellegrini in a letter sent to his investors this morning.

All outside capital will be returned by September 30, the letter said. Pellegrini plans to continue managing his own capital in the fund, and wrote that if he reopens in the future he will honor investors’ high-water marks. It was unclear what would happen to PSQR’s staff. The firm declined to comment.

Paolo Pellegrini is best known as the architect of the short subprime bet while co-managing the credit opportunity funds at John Paulson’s Paulson & Co. Pellegrini foresaw the credit bubble as early as 2005 and worked to devise the trades that turned Paulson into the fourth-largest hedge fund firm in the country.

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ISSN: 2151-1845 / CDC10004H

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